Philanthropy in Public Higher Education

Written by Alyssa Rossodivita and Gerry Pantoja

Definition

Private philanthropy has played an increasingly visible and vital role for both public and private institutions. In addition to supporting the expansion of facilities and supplying risk capital for research and curriculum development, philanthropy contributes to financial aid for low-income students and others who face barriers to accessing and completing college. Thus, giving to higher education provides improved economic opportunity and strengthens America’s civic and economic fabric (Osili 2019).

Because tuition does not cover all the expenses of a university, funding comes from sources beyond students’ tuition, room, and board each year (Peterson’s). Public colleges and universities are funded by the United States government (federal, state, and local), student tuition and fees, and private sources, which include: private gifts, grants and contracts, sales and services of educational activities, hospital revenues, and auxiliary enterprises (Government Accountability Office 2014).

In the context of higher education, philanthropy is generally considered to be any money that the university receives that does not come from the government (Thelin and Trollinger 2014). U.S. colleges and universities raised $46.73 billion in the 2017-2018 academic fiscal year, 7.2 percent more than the previous period and the highest amount ever raised by higher education institutions in the U.S. (CASE 2019).

Foundations and individual giving by alumni and non-alumni to higher education make up the most significant component of higher education philanthropy. In 2017, giving by foundations (including family foundations) to higher education reached $13.13 billion, and alumni giving amounted to an estimated $11.4 billion, comprising 30 and 26 percent, respectively, of all higher education giving (Osili 2019). Efforts to grow philanthropic efforts at colleges and universities have led to the development of university foundations, endowments, capital campaigns, and of course, internal development/fundraising teams (Thelin and Trollinger 2014).

According to a December 2018 report from the National Association of State Budget Officers (NASBO), enacted budgets for the current fiscal year increased higher education spending by $3 billion, a marked improvement from the $1.3 billion increase in the prior fiscal year. State budgets increased spending overall; 44 of the 50 states increased general fund spending for the current fiscal year, and 20 states boosted spending by over 4 percent. (AASCU)

New state revenue provides leverage for governors and legislators to negotiate tuition freezes or tuition increase caps. This has kept tuition increases relatively moderate in recent years. According to the College Board’s Trends in College Pricing, average in-state tuition and fees at public four-year colleges and universities increased 2.5 percent, or $250, from 2017-18 to 2018-19 before adjusting for inflation. At public two-year colleges, the average in-state rate increased by 2.8 percent, or $100.17 The moderate tuition increases are likely to continue into 2019, as many governors taking office and those currently in office have made college affordability a core component of their education agenda. (AASCU).

While private universities have a rich history of large philanthropic contributions, public universities have relied heavily on government funding, setting public colleges several steps behind in the philanthropic arms race (Thelin and Trollinger 2014). Of the top twenty colleges and universities with the most philanthropic contributions, only seven were public. The top private university (Harvard) received $1.42 billion dollars in 2018, and the top public university (University of California - Los Angeles) raised at $786.66 million in donations (Bryan, Kathy).

Historical Roots

Philanthropy has played an important role in the history of higher education since the seminal donation made by John Harvard in 1636, which created the now world-famous college of the same name (Burlingame 2014). However, most, if not all, of the early philanthropy for higher education was dedicated to the founding of new private colleges, whether in the form of donated money, books, parcels of land, or even endowed professorships (Thelin and Trollinger 2014). Intentionally marking itself as different from its previous British colonists, the young United States sought to ensure that the government was not required to fully fund all of its colleges, encouraging this growth of private universities (Thelin and Trollinger 2014). Thus, the early to mid-1800s saw an increased interest in private giving by wealthy individuals and formal associations to higher education, even though much of it went to private institutions (Thelin and Trollinger 2014).

With the advent of legislation such as the 1787 Northwest Ordinance and the 1862 Morrill Land Grant Act, public institutions were founded and funded throughout the country by the U.S. government (Thelin 2011). This work by the government was instrumental in opening up higher education to women and minorities, beginning the movement toward conceptualizing post-secondary education as a public good (Thelin 2011).

Starting in the 1920s, philanthropic support for universities began to funnel through foundations, which are institutionally affiliated public charities that raise money separately for a university (Council for Advancement and Support of Education). Since public universities have to follow state regulations with funds received from the government, such as salary caps for coaches, they began to create their own organizations to fundraise and provide money to the university (Thelin and Trollinger 2014). Much of this support was gathered via growing alumni associations, especially at state universities (Thelin and Trollinger 2014). Then, after WWII, another shift in public education occurred: the Council for Financial Aid pooled money from individuals, corporations, and foundations to make a large contribution toward financial aid for students who could not otherwise afford to attend college (Thelin and Trollinger 2014). This furthered the accessibility of public higher education and heightened the role of philanthropy in doing so.

The 1980s saw a downturn for all colleges, both public and private, in available funding (Thelin and Trollinger 2014). During this time, it was especially difficult for public institutions to access funds outside of the government because a) some foundations did not donate to public colleges and b) some public colleges did not have dedicated development/fundraising efforts yet, since they had relied so heavily on government funding (Thelin and Trollinger 2014). Thus, in the 1990s, public universities began to hire fundraising teams to rival private colleges; during this time, the University of Virginia conducted the first capital campaign (Thelin and Trollinger 2014). Again, during the more recent Great Recession of the early 2000s and 2010s, there has been less public funding, causing tuition rises, but this time private donations have stayed more or less steady at almost one third of overall funding (Government Accountability Office 2014).

Importance 

A quick glance at a timeline of the history of philanthropy makes it clear that giving to higher education has had a strong root in American history (Burlingame 2004). Even though America emphasized the use of private funding to create less state-centric universities (Thelin and Trollinger 2014), public colleges have been created and maintained to provide an important public good. These universities do so at a more affordable cost and a much higher rate than other universities: public institutions (4-year and 2- year) educate more than 13.3 million students each year, far more than the combined 4.6 million in private and for-profit colleges (NSCRC). Thus, public higher education is critical to carrying out the ideals of our country.

The sources of donations to higher education are varied, but in 2018, the breakdown was as follows: foundations (30%), alumni (26%), non-alumni individuals (18.3%), corporations (14.4%), and other (11.3%) (CASE 2019). Universities benefit from philanthropy not only to cover financial aid and operational costs, but also to subsidize tuition, reduce the burden on the government, increase access to college for traditionally underserved populations, fund research, and improve the overall quality of education (Mitchell 2014; Peterson’s). Critically, philanthropy in higher education has a long history of providing access to groups of students who are at a disadvantage to attend college—such as African Americans and low-income students—thus providing improved economic outcomes and strengthening our country (Thelin and Trollinger 2014).

Ties to the Philanthropic Sector

Nonprofit organizations (NPOs) and foundations are the organizational unit of philanthropy (Anheier 2014). By one theory, these NPOs exist to meet the needs of people when the government and the market fail. Philanthropy for public higher education institutions can help meet the needs of the institutions when government funding is not enough (Thelin and Trollinger 2014). Yet, giving to public institutions is also a way of circumventing the market failure that occurs when private colleges cannot educate all for reasons of size and cost (Thelin and Trollinger 2014).

Philanthropy in higher education has evolved from individual donors to organized giving—with the latter occurring mainly through two philanthropic vehicles, foundations and endowments. University foundations allow for more flexibility than the government allows with public funds, which is especially important for public universities. Thus, university-affiliated foundations allow institutions to invest donated funds, make specific purchases (i.e. purchases of land), and start a for-profit business, from which all profits may go toward the university (Thelin and Trollinger 2014). Endowments, on the other hand, are large donations given to a university with the expectation that only interest will be spent so that the principal will remain and continue to sustain the university (Burlingame 2004). To be a good steward of an endowment, universities usually spend less than 5% of it each year (Thelin and Trollinger 2014). Following the trend that public universities receive less donations than private colleges, endowments at public universities tend to be smaller than those for private institutions: as of 2019, the top private endowment was at Harvard, of $38.3 billion, while the top public endowment was within the University of Texas system, at $30.8 billion (Best_Schools).

Key Related Ideas

• Alumni Giving: Alumni, as defined by CASE, are graduates of the institution and others with a prior academic relationship, including non-graduates, certificate and credential holders, distance learners, lifelong learners, residents, post-docs, honorary degree recipients and honorary alumni (CASE 2018). Alumni provide the second largest philanthropic contributions, after foundations themselves (CASE 2019). At the same time, alumni giving may be affected by many factors, including how “needy” their alma mater appears (Stiffman 2016).

• Concentrated Wealth: 28% of all donations to public and private universities went to only twenty universities (Bryan, Kathy). As such, criticism is mounting that elite universities, especially those with an already large endowment, are enjoying some of the biggest donations, though they may not be the institutions with the most need (Koenig, 2016).

• Restricted vs. Unrestricted Giving: Donations to college and universities can be either restricted, in which they are designated for a specific purpose, or unrestricted, which does not have a specified purpose by the donor (Burlingame 2004). This concept is particularly important when considering university donations, given the large variety of things that a single donation could be used for, from purchases of books for a library to a new athletic scoreboard (Seltzer 2016).

Important People Related to the Topic

• Oseola McCarty (1908-1999): Ms. McCarty was an African American washerwoman who donated her life savings—$150,000—to the University of Southern Mississippi. The contribution was specifically meant to provide scholarships in order to advance education for African Americans at a public university (Burlingame 2004).

• Robert Morin (1938-2015): A University of New Hampshire librarian who passed away in 2016, Mr. Morin donated $4 million to his former employer in his bequest. This donation sparked controversy, however, when it was used in large part to fund a new scoreboard for the university, reigniting age-old questions about how universities should spend donation money (Seltzer 2016).

• John D. Rockefeller (1839-1937): One of the foremost philanthropists of his time and throughout history, Rockefeller was one of the most committed to education and educational access. In addition to his donations to countless colleges, most of which are private, he put forward the money to start the General Education Board, an organization with the mission to expand access to higher education for all students, regardless of race or other minoritized identities (Thelin and Trollinger 2014).

Related Nonprofit Organizations

• Council for Advancement and Support for Education (CASE): is the global association for professionals in advancement—alumni relations, communications, development, marketing, and advancement services—who share the goal of championing education to transform lives and society. CASE provides the annual Voluntary Support of Education (VSE) Survey the authoritative North American source of data on charitable giving to higher education and private K-12 institutions. (https://www.case.org/)
• American Association of State Colleges and Universities: This is an organizing association for public colleges and universities, in order to advocate for their work, provide information for their continued improvement, and provide leadership to the 420 colleges and universities that are members (http://www.aascu.org/).
• Lumina Foundation: This is a young foundation, created in 2000 and based in Indianapolis, with an endowment that is larger than $1 billion to improve higher education attainment. They are working toward Goal 2025, which says that “by the year 2025, 60% of Americans will hold highquality degrees, certificates and other credentials” (https://www.luminafoundation.org/).
• Top fundraising public universities in 2018 (Bryan, Kathy):○ University of California - Los Angeles, San Francisco, Berkley, University of Washington, University of Michigan,  Ohio State University,  Indian University 

Reflection Questions

1. Are you planning to go to college? How does learning about the way that higher education is funded affect your view on going to college and whether you would prefer a private or public university?

2. If you’re planning to go to college, do you think you will donate to your alma mater afterward? Why or why not?

Bibliography

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• Koenig, Rebecca. “U.S. Colleges Raise $40 Billion; Stanford Tops List at $1.6 Billion.” - Chronicle of Philanthropy, January 27, 2016, https://www.philanthropy.com/article/USColleges-Raise-40/235059/.

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This paper was developed by students taking a Philanthropic Studies course taught at the Lilly Family School of Philanthropy at Indiana University in 2019. It is offered by Learning To Give and the Center on Philanthropy at Indiana University.